WB urges greater economic mobility, social aid in ‘new Thai model’

THE WORLD BANK has warned that Thailand's economic development model is obsolete and has recommended an incorporation of three new pillars for the next step of development.

Thailand and other developing East Asian countries had been successful in reducing extreme property but the region is facing rising income inequality among the haves and have-nots, according to the World Bank report entitled “ Riding the Wave : An East Asian Miracle for the 21tst Century”, released yesterday.

The region has transformed from being comprised of mostly poor countries in the 1980s to a group of middle-income country, said the report.

“It's a historic achievement that nearly a billion people in East Asia moved out extreme poverty in just one generation,” Victoria Kwakwa, World Bank vice president for East Asia and Pacific, said at the report presentation in Bangkok.

“But for the region to sustain inclusive growth, countries will need to address the challenges of fully eliminating extreme poverty, enhancing the prospects for economic mobility, and assuring economic security for all,”she suggested.

“By 2015, almost two-third of the region's population were either economically secure or middle classes, up from 20 per cent in 2002,” said Sudhir Shetty, World Bank chief economist for the East Asia and Pacific region.

He said that the World Bank has come up with three pillars which can underpin the policy agenda for next step development.

The first - fostering economic mobility-requires closing gaps in access to jobs and services, improving the quality of jobs and promoting financial inclusion. The second -providing greater economic security-includes bolstering social assistance systems, expanding social insurance, and increasing resilience to shocks.

Strengthening institutions is the third pillar, and includes progressive taxation policies to raise resources and improvements in the effectiveness of inclusive spending programme. Better management of a rapidly aging society and urbanisation as well as enhancing competition will also help.

Somchai Jitsuchon, a veteran economist at Thailand Development Research Institute, said that the report places Thailand and Malaysia in “progressive prosperity” countries, the most advanced among developing countries in the region, this might be too good to be true for Thailand.

He argued that Thailand has failed in its education policy which have resulted in low quality of education at public schools. He also blamed the tax policy for failing to raise more tax from the rich who can afford to pay more. This caused fiscal policy failing to function as a redistributive channel that could better address income inequality. Somchai suggested fiscal decentralisation by increasing local government capacity to collect their own tax revenue and the central government should send more revenue to the local governments. He also suggested political decentralisation, diverging political power away from Bangkok. The government should also promote free local elections at provincial level and sub-provincial levels.

Meanwhile, Porametee Vimolsiri, secretary general of the National Economic and Social Development Board, a state planning agency, said there are about 29 million people, or 40 per cent of the population, at the bottom of society that the government needs to take care of - with seven million living below poverty line.